REIT stocks rebound from three-year decline

Three real estate companies with a big presence in Atlanta — Cousins Properties Inc., Duke Realty Corp. and Parkway Properties Inc. — have seen their stocks rebound to their highest prices in at least three years.

Their recoveries underscore an improving commercial real estate market for building owners in metro Atlanta, which has been one of the slowest markets to bounce back since the downturn.

The companies’ turnarounds also share something in common.

“All three have leadership that did a great job of repositioning their companies with some very thoughtful deals,” said Bob Mathews, president and CEO of commercial real estate services company Colliers International Atlanta. “Now they’re all in a position to take advantage of the Atlanta market improving.”

At press time on March 27, Cousins Properties (NYSE: CUZ) was trading at close to $11, up about $3 per share versus a year ago. Its stock price stood at its highest level since early 2009.

Parkway Properties (NYSE: PKY) was trading at a little more than $18.50, its highest level since the second quarter of 2010.

Duke Realty (NYSE: DRE) was trading at just over $17, its highest point since the fall of 2008, when the banking crisis unfolded and financial markets were losing more than 30 percent of their value.

All three real estate investment trusts (REITs) adapted in the wake of the worst downturn to hit commercial real estate in Atlanta in years.

In 2011, Blackstone Real Estate Partners agreed to pay a little more than $1 billion to Duke Realty for 82 suburban office properties in seven suburban markets including those outside of Atlanta, Chicago, Dallas, Minneapolis, Orlando and Tampa.

At the height of the market in 2006, Duke Realty was one of Atlanta’s largest owners of office properties, with projects that dotted the suburbs — primarily in Fulton and Gwinnett counties.

Reducing its exposure to suburban properties was one key adjustment.

Investing in medial offices was another.

Last fall, it bought two medical office portfolios totaling more than 1.5 million square feet. That grew its investment in medical office assets to 15 percent, marking the goal the company set as part of its five-year turnaround.

For Atlanta-based Cousins, the downturn sent its stock price plummeting from just north of $30 a share in 2008. A flurry of moves helped the company turn the corner.

CEO Larry Gellerstedt oversaw a plan to shave hundreds of millions in debt. He told stockholders the company would simplify its portfolio. Last year, it reached an agreement to sell its third-party office leasing and management business to Cushman & Wakefield. Cousins also put an emphasis on investing in cities whose job markets are recovering faster.

It’s found success with new office acquisitions in the Dallas office market.

Cousins also made a shrewd decision in 2011 when it bought the 38-story Promenade tower in Midtown well off its peak price.

It has improved the building to more than 77 percent leased, up from 58 percent about two years ago. It may have more leasing deals to announce at Promenade later this year, according to commercial real estate executives familiar with the discussions.

Cousins is also developing local mixed-use projects in strategic locations, such as near Emory University, where it has Emory Point. It’s also working on a potential project in downtown Decatur.

Like Cousins, Parkway decided to invest capital in highly amenitized Sun Belt cities. Last year it received a boost to that plan when it secured $200 million in equity from TPG, a global private investment firm.

Last year, it used that infusion of new capital to reach an agreement to buy Tower Place 200, one of the anchors of Buckhead’s Tower Place mixed-use development, for $56 million. Parkway now has three Buckhead towers clustered together: Tower Place 200; the 50-story 3344 Peachtree and the 17-story One Capital City Plaza.

That could allow Parkway to rebrand the properties and offer it a competitive leasing advantage on a key stretch of Peachtree.

Duke, Cousins and Parkway have become “industry leaders,” said John Guinee, with Stifel Nicolaus Research.

“They sold mature stabilized assets and then reinvested in value-add assets, also known as asset recycling. They also exited secondary markets and reinvested in primary markets. And the stock market has rewarded them.”